One of the best things about the Nexus 7 is that it combines high-end features with an incredibly low price. The 8GB model eases in at just $199 while the more capacious 16GB model comes in at a mere $ 249. But Google and ASUS do have to work around issues with such a low price. Google reported to AllThingsD yesterday that they’re selling the device at cost to consumers and that they’re also covering the marketing costs. What that means is that Google isn’t making any profit off the Nexus 7 tablets that they’re selling. If the Nexus 7 turns out like Google wants it to, then this could definitely pay off for Google but if not, well, Google could be in for a few hits. Let’s hope that it pays off for them. How many of you have pre-ordered the Nexus 7 so far?
This is a very smart move by Google. Google stand to make the most money by getting these devices into the hands of as many consumers as possible. Like jarrod said, Google makes money from the Play Store. So that want as many people using the services as possible. It's why it was rumored that some of the Nexus devices would actually be free. But of course the manufacturers like HTC, Samsung, and Asus need to make money somewhere.
This is not so unusual, typically in the home console market for example, consoles are not only not making a profit but are actually selling at a loss for the first few years of a systems life. Money is generated from accessories, games, etc. Google could make some killer apps for the tablet market and generate the money back easily. You don't make money from selling a razor, the money is in the blades.
LanceTomlinson They don't really need to, if you go to google something it returns revenue for their loss, and also if you buy music apps movies and other things from the play store they are getting a return investment. It may be slow at first but they will start bringing in money unless the average consumer is like me and don't like to purchase items credit cards in app stores because of possibility security risk, then that could be a huge issue.